Although it’s not the most exciting thing on your financial to-do list, it’s always a good idea to review your estate plan from time to time. If you’ve recently experienced a major life change, such as moving to another state, or if it’s been more than five years since you last updated something, you may be wondering if your current plan still does exactly what you want. You need to make sure it is reflected.
Reviewing your estate plan can give you peace of mind that you, your family, and your assets are protected should the unexpected occur.
What is an estate plan?
Before we get into estate plan reviews, it’s probably best to take a step back and understand what an estate plan is.
An estate plan is essentially a set of instructions expressing your wishes for the distribution of your assets and medical care in the event you die or become incapacitated.
An estate plan allows you to:
- We create a comprehensive plan to ensure your loved one is protected, informed, and able to implement your plan.
- Decide and communicate how your assets will be distributed upon your death
- Structure the ownership of your assets to your liking while you are alive and ensure they are distributed according to your wishes
- If you are unable to make your own decisions, express your preferences regarding the type of medical care you would like.
- If you are unable to make decisions on your own, appoint a trusted financial and medical support person
Note: Using NewRetirement Planner,[マイ プラン]>[資産計画]you can track estate planning documents that you have already created or that you need to create in the future.
track real estate value
As part of your estate planning process, you’ll want to know what you’ll have at the end of your life. NewRetirement Planner helps you visualize this forecast. This tool shows your net worth and wealth over time. You can also maintain different scenarios to evaluate projected assets.
For example, what would be your property if:
- Requires long-term care
- Live 10 years longer than expected
- Develop a gifting strategy to share wealth during your lifetime
- etc…
And of course, this tool allows you to monitor your wealth projections and track how they change as your life progresses.
Reviewing the most common documents as part of comprehensive estate planning
There are many different types of documents that make up an estate plan.
Most of these will apply to your situation (e.g., a will or health care power of attorney), but some may not (e.g., a revocable or irrevocable trust). Either way, when considering your estate plan, it’s important to understand what role each of these documents plays and what to consider when reviewing your plan.
last will and testament
A last will and testament forms the basis of a carefully considered estate plan.
Through a will, you can not only specify how you want your assets to be distributed, but also appoint an executor to oversee the implementation of your wishes. This ensures that your estate is distributed according to your intentions.
When reviewing a will, you should consider the following:
- Enforcer: Is the person appointed to oversee your estate after your death still in line with your wishes and able to fulfill their responsibilities?
- co-executor: If I name two people as executors, for example my spouse and my brother, does it still make sense, or will things become more complicated?
- successor executor: Have you named a successor executor in case something happens to your first choice?
- minor child: If minor children are in the picture, does the will include provisions that control the timing and amount of access to funds?
- guardian: Even if you appoint a guardian for a minor child, is that guardian suitable? Is the guardian physically capable? Will they give similar values?
Note: Assets passed through a will go through a legal process known as probate, where the court verifies the will and begins the estate distribution process.
Revocable or Living Trust
Trusts can be a part of your estate planning because they may give your heirs more control over when and how they inherit your property.It is important to note A trust does not eliminate the need for a will.but.
A revocable trust, or living trust, gives you the flexibility to change or renew the trust at any time as long as you are alive and mentally sound. By creating a living trust, you can place assets into the trust, and upon your death, the trustee (the person responsible for managing your money and assets) will distribute the assets to your heirs according to the trust document. . While you are alive, this type of trust allows you to maintain control of your property and assets.
When reviewing your revocable trust document, assuming it is part of your estate plan, consider the following:
- Are your current assets properly titled?
- Is the beneficiary designation appropriate? (More on this later!)
- How will your assets be divided and distributed after your death?
- Is the successor trustee still your intention, or do you have someone else in mind now?
irrevocable trust
An irrevocable trust transfers ownership of assets to the trust and relinquishes control. Typically, once established, it cannot be changed.
When assets are placed in an irrevocable trust, the value of the assets is not added. Unlike a revocable trust, an irrevocable trust is a great asset protection tool because creditors cannot seize the asset because it no longer belongs to you.
Irrevocable trusts tend to be more complex and less common than revocable trusts in estate planning. However, if you own this type of trust, you must ensure that your actions are consistent with the terms of the trust and that income tax returns are properly filed for irrevocable trusts. there is.
Note: Trusts are not required for every estate plan out there. Consult with an estate planning attorney to determine whether a trust is essential to your estate planning and which type makes the most sense for your particular situation.
General (financial) power of attorney
Estate planning doesn’t just focus on what happens after you die. Even if you are alive, you may have to make decisions even if you are no longer able to make decisions for yourself due to a serious illness or disability. This is where a power of attorney comes into play.
A general power of attorney gives someone broad authority to make various financial decisions on your behalf if you are temporarily unable to do so. However, if your health deteriorates or you die, the benefits will be invalidated.
Review the terms of your general power of attorney to determine if any of the following apply to you:
- limited: If your power of attorney is limited, you are giving someone the right to only make certain financial decisions, such as selling real estate.
- durable: A durable power of attorney can be general or limited and continues beyond your incapacity.
- gush out: When a power of attorney is issued, it is conditional on the occurrence of certain specified factors, for example mental incapacity.
Healthcare Power of Attorney and Living Will
While a general power of attorney deals with financial matters, a health care or medical power of attorney is someone who makes medical decisions on your behalf if you become incapacitated. Nominate.
In either case, you will be appointing an agent to ensure that your wishes are followed. When identifying a power of attorney, consider the following:
- Is this person trustworthy?Agents have a big responsibility
- Is your agent local or readily available to best serve your needs?
- If you name multiple agents, can they act individually or must they act jointly?
- Have you named a replacement agent? Are they suitable backups for your primary agent?
It is not uncommon to combine a health care power of attorney with a living will or advance health care directive.
Through your living will, you will want to clearly express your wishes regarding end-of-life treatment options. Your thoughts and ideas about palliative care, life-sustaining medical procedures (think ventilators and feeding tubes), and other end-of-life decisions may have changed over time.
Don’t forget to name your beneficiaries.
Beneficiary designation is the act of designating the person who will receive assets when the account owner dies. When the account owner dies, the designated beneficiaries inherit the assets.
Common accounts with beneficiary designation include:
- Retirement accounts such as 401(k), 403(b), IRA, and similar accounts
- life insurance contract
- pension
Make sure all applicable accounts and insurance policies have beneficiaries designated. It’s common to overlook an account you opened 15 years ago or an old 401(k) you didn’t know you still had.
There are two primary beneficiary designations.
- Major: The primary beneficiary is the person or entity who initially receives the asset. If you die, your primary beneficiary will be the first to inherit your property.
- temporary: A contingent beneficiary is the person or entity who is next in line to receive assets if the primary beneficiary is not alive.
Beneficiary designations take precedence over distributions provided in a will, so it is important to ensure that beneficiaries are coordinated with your estate plan. If you amend your estate planning documents without updating the beneficiary designations for these types of accounts, the distribution upon death may not match your intentions.
Don’t ignore your digital assets
In a technologically advanced world, it is essential to consider digital assets when reviewing your estate plan. These assets can be handled either in a will or in a trust.
Digital assets are electronic records that have value to your heirs, such as:
- online banking account
- social media accounts
- email account
- What’s stored on your smartphone or tablet?
- website
- electronic medical records
- cloud storage
- more!
It’s very helpful to have a list of all your digital assets and the passwords needed to access that information. Your heirs need to know where your records are.
An estate planning attorney must ensure that the estate plan authorizes the executor or trustee to access digital assets.
Common mistakes in estate planning
Because of the complexity of putting together an estate plan, it is not uncommon for mistakes to occur.
When considering estate planning, beware of the following mistakes.
- Original document location unknown: Make sure documents are kept in a safe and accessible location known to family members and trustees.
- lack of liquidity: Ensure your heirs have enough liquidity to cover expenses like final expenses and estate taxes without having to sell anything (thankfully, you can add one-time expenses in the NewRetirement Planner) .
- Choosing the wrong executor: Problems can arise if you choose someone who is uninterested or lacks the skills to understand your particular problem.
- Failure to designate a contingent beneficiary: If your account, such as a 401(k) or IRA, has no contingent beneficiary, if the primary beneficiary dies, your assets are considered probate assets and become part of your total estate.
- overlook the final deal: Would you like to be buried or cremated? Do you have any specific thoughts about a funeral or interment? A well-structured final arrangement plan allows you to plan a meaningful farewell for family and friends to express their feelings of farewell.
- All-in-one real estate planning: Keep your estate plan up to date! Review your plan every 3 to 5 years or when a major event occurs, such as a marriage, death, or move, so it reflects all future changes in your life. Become.
Successful retirement planning must include comprehensive estate planning
Your assets are effectively the end result of your retirement plan. However, as we have seen, there are many documents that need to be prepared to ensure that your wishes come true. It’s essential to keep both your retirement and estate planning up to date so you can live the life you want to live and ensure that your wishes are fulfilled even after you’re gone.